Articles in this edition cover:
- DC Transfer Working Group
- FCA “nudge” consultation
- HMRC publishes Trust Registration Manual
- TPR renews call to sign anti-scam pledge
- PDP updates
- DWP publishes consultation on pension scams draft regulations
- Queen’s Speech 2021
- TPR launches new Corporate Plan
- TPR publishes 2021 Annual Funding Statement
- One month to update transfer processes
- DWP consults on simpler annual benefit statements
- Pensions consumer journey – call for input
- Government announces changes to LGPS
- FCA consultation on a new category of long-term asset fund
- FCA to continue supervisory action on DB – DC transfer advice
- LIBE calls for amendment to draft UK adequacy decisions
- Data sharing code of practice laid before Parliament
- TPR and PPF launch joint consultation on DB data
- DWP consultation on permitted charges in a DC scheme
- FOS figures show 91% increase in investment and pension complaints
- Code of Practice 12 consultation – New Contribution notice tests
The Pensions Administration Standards Association (PASA) has announced details of its DC Transfer Working Group, covering transfers between DC to DC arrangements; to trust and contract-based schemes, both UK and overseas.
PASA Chair Kim Gubler said: “Transfers between trust-based DC schemes is a key, and growing, part of PASA's remit, so it should come as no surprise we are announcing the formation of a DC Transfer Working Group, with a key objective of driving improvement in this area. The time taken, and the processes followed, vary hugely, with a resulting detrimental impact on the service offered to consumers, and the trust placed in the trust-based DC community.”
The group will draft guidance and present its recommendations to the PASA Board for consideration and approval for publication.
The first guidance is expected to be published in early 2022.
The FCA has proposed new rules requiring pension providers to “nudge” consumers towards Pension Wise before accessing their DC pension savings.
Under the proposed rules, a provider must refer the saver to Pension Wise guidance, explain the nature and purpose of the guidance, offer to book an appointment, and, where the consumer accepts the offer, either book the appointment or provide the consumer with sufficient information to book their own appointment. While Parliament has chosen not to make these appointments mandatory, it has set a requirement to encourage consumers to take Pension Wise guidance. The FCA has published a consultation paper inviting additional ideas on how to increase the take-up of Pension Wise.
New rules were introduced in October 2020 as part of the UK’s implementation of the Fifth Money Laundering Directive, which extend the scope of the trust register to all UK and some non-UK trusts that are currently open (whether or not the trust has to pay any tax, but with some specific exclusions).
On 4 May 2021, HMRC updated its guidance on trust registration and on 17 May 2021 published its Trust Registration Service (TRS) Manual which outlines the types of trust that need to be registered, and provides detail on registration, deadlines, trustee data retention obligations and third party access requests.
However, pension schemes already registered with HMRC will not need to register on the TRS if the scheme administrator has to pay UK income tax solely because:
- they are jointly and severally liable with the member for a lifetime allowance charge;
- they pay the member's annual allowance charge; or,
- they are liable to:
- special lump-sum death benefits charge
- short service refund lump sum charge
- authorised surplus payments charge
- de-registration charge
- unauthorised payments charge or surcharge
- scheme sanction charge
- overseas transfer charge, or
- tax under PAYE on a member's pension or lump sum benefits or on the benefits of the recipient after the member dies.
The UK registered pension schemes are excluded from registration as express trusts.
Regardless of whether the trust is required to register on the TRS, the trustees are required to keep their own written record of certain information where the trust is a 'relevant trust'.
This is required because law enforcement authorities can request this information from a trust.
The Pensions Regulator (TPR) has renewed its call to pension providers, trustees and administrators to sign its pledge to combat pension scams.
Nicola Parish, TPR’s executive director of frontline regulation said 241 schemes and organisations, including Equiniti, had already committed to meeting the code’s principles.
Speaking at the Association of British Insurer’s conference Parish said that TPR expects more restrictions on savers’ statutory rights to the transfer of benefits, such as enabling trustees to refuse to transfer in certain situations.
She also called on the different players in the pension industry to be innovative in finding ways of spotting scams and taking action.
The Pensions Dashboards Programme (PDP) has published its April 2021 progress update report, which is the third in its series of reports outlining the work that the programme has undertaken over the last six months to make pensions dashboards happen and its priorities for the next six months. The report includes updates on programme achievements, senior team changes, the programme timeline, including greater detail on programme milestones, procurement of the digital architecture and identity service procurement.
In particular, the report reveals that a staging call for input will be issued at the end of May, detailing proposals developed in collaboration with the DWP, the FCA and TPR for the staged compulsory connection of pension providers to the dashboard ecosystem. A specification document for suppliers will also be published, providing more information about the ecosystem's functionality in preparation for those connecting to the dashboard.
The (PDP) has published a blog to accompany the release of the latest progress update report for pensions dashboards. In the blog, Richard James, Programme Director at the PDP, provides more information about the report contents, including details about the updated programme timeline and the technical architecture procurement.
Mr James writes that: “We are now into the procurement exercise, and by the time I introduce the next progress update report in October, we expect to have a supplier in place to deliver the central architecture. In parallel, we are working on the procurement for the identity provider(s). The programme, therefore, becomes ever more tangible, with the physical development of our digital architecture.”
In a busy month for PDP, it has also published a call for input on proposals for the staged compulsory connection of pension providers to the dashboards ecosystem. The feedback on the proposed order and timing of the staged connection of pension providers to the dashboards ecosystem will help inform policy development ahead of the legislation that will bring this compulsion into effect.
Chris Curry, Principal of the PDP at the Money and Pensions Service (MaPS), said: “This is a concrete opportunity to shape the proposals at an early stage, which will feed into the formal DWP consultation later this year.” Minister for Pensions and Financial Inclusion Guy Opperman added: “Making dashboards available to people at the earliest opportunity is a key part of our strategy to get people more informed about and involved with their pensions savings. So I would encourage anyone with an interest in dashboards to feed in their views on the programme’s emerging proposals for how and when we bring pension schemes on board from 2023.”
The PDP proposes that staging should comprise three waves based on membership (the total number of the pension provider’s members):
- wave one: largest schemes (1000+ memberships)
- wave two: medium schemes (100 to 999 memberships)
- wave three: small and micro schemes (99 or fewer memberships)
Wave one would start in April 2023 and would run for up to two years. In this wave, the PDP recommends three distinct cohorts:
- cohort one: master trusts and FCA regulated providers of personal pensions, starting Spring 2023
- cohort two: DC schemes used for AE during 2023
- cohort three: all remaining occupational schemes with 1,000+ memberships (in order of size) with the largest DB schemes to onboard in 2023
The call for input will run until 9 July 2021.
The PDP has also published a technical document outlining the functionality of the digital architecture that sits at the heart of the pensions dashboards ecosystem.
Some other useful links are as follows:
- Programme timeline
- Data providers timeline and steps to connection
- Programme phases
- Collaborating to deliver dashboards
- An introduction to delivery partners and programme dependencies
The DWP has published a consultation seeking views on a set of draft regulations concerning pension scams.
The proposed Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 would require trustees or scheme managers of occupational and personal schemes to ensure that at least one of four conditions is met before they act on a pension transfer request from a member of their scheme.
The regulations would also introduce a new red and amber flag system, allowing for transfers to be prevented or paused whilst the member takes guidance about the possibility of scams.
Guy Opperman, Minister for Pensions and Financial Inclusion said: “Pension scammers are the lowest of the low and, with the growth in recent years of online scams, we must act now to curb them. Our new regulations will build a strong, first line of defence in the fight against pension fraud — helping stop these crooks from making off with people's hard-earned savings.”
The consultation closed on 10 June 2021.
The House of Lords Library has published a briefing on possible announcements in the Queen's Speech relating to pensions and benefits.
The briefing covers the possible next steps in pensions legislation following the passing of the Pensions Schemes Act 2021 and other pensions proposals.
On 11 May 2021, the Queen delivered the Queen’s Speech, marking the formal opening of Parliament and setting out the Government’s legislative agenda for the coming session.
From a pensions perspective, the Government announced the Public Service Pensions and Judicial Offices Bill. The purpose of the Bill is to ensure equal treatment for all members within each of the main public service pension schemes in order to remedy the discrimination identified in the McCloud litigation.
The Bill also seeks to reform the pension arrangements and increase the mandatory retirement age for judicial office holders from 70 to 75 and put judicial allowances on a firmer legal footing.
TPR has published its new three-year Corporate Plan, which shows how the Regulator will deliver against the priorities outlined in its recently published long-term Corporate Strategy. TPR said that, as it continues to respond to economic uncertainty following the COVID-19 pandemic, three of the key priorities for the next three years are implementing the Pension Schemes Act 2021, combatting scams and developing a framework for measuring value for money.
TPR Chief Executive Charles Counsell said: “The landscape ahead is both exciting and challenging, and we are determined to embrace ever more change: from the ongoing shift to DC saving and market consolidation to the emergence of new technologies and the impact of climate change on trustee and employer decision-making.”
TPR has published its latest Annual Funding Statement (AFS), which highlights the need for trustees of DB pension schemes to remain alert to the risk of weakening employer covenants as there is still uncertainty in the market. The AFS outlines how trustees should consider the long-term funding and investment of their scheme depending on the impact of COVID-19, Brexit, scheme maturity and the scheme's funding position relative to its long-term target. It also includes guidance on addressing these issues and sets out actions TPR expects trustees to take.
TPR Executive Director of Regulatory Policy David Fairs commented: “This has been a challenging period for many employers and so trustees in carrying out actuarial valuations need to review how their covenant may have changed in the past year and then continue to monitor it. We expect them to remain engaged with employers, who are emerging from a difficult business period in many cases. If there is a prospect of insolvency or a restructure of scheme employers. In that case trustees should probe the covenant even further and take professional advice to gain a fresh view on covenant strength to ensure their scheme is being treated fairly. The pandemic has thrown up short-term challenges which heighten focus on areas such as sustainability and climate change and the impact that they can have on sponsors but also scheme assets and liabilities”.
The Pensions Ombudsman expects pension providers to update their transfer processes, due diligence checks and member communications within one month of the new scams regulatory guidance being issued.
The new time frame, announced in a recent decision, is significantly less than the three-month period the ombudsman had previously indicated would be acceptable.
The ombudsman’s decision refers to Mr R, a member of the Scottish Motor Auctions Ltd group personal pension plan, who had put forward a complaint against Aegon in 2017.
In 2012, Mr R transferred his pension benefits to a smaller scheme administered by Greenchurch Capital. The scheme then submitted paperwork to Aegon on February 13 2013, a day before the Pensions Regulator issued its new Scorpion leaflet and updated its regulatory guidance on pension scams.
On February 15, Aegon transferred an amount of £21,461.92 to Greenchurch. However, an administrative error within the receiving scheme’s bank meant that the entire transfer value was refunded back to Aegon.
Later, the transfer was completed on March 19, just a month after the Scorpion literature was published.
As a result, in 2017, Mr R complained that Aegon did not proceed with appropriate checks before transferring his pension to Greenchurch. He also argued that the Financial Conduct Authority did not regulate the receiving scheme’s administrator.
Furthermore, Mr R stated that Aegon did not act with the new due diligence expectations, which the Regulator set out in the Scorpion guidance document.
Mr R stated that Aegon failed to inform him of the risks of transferring his pension benefits to the small self-administered scheme, and said if he had known, he would not have proceeded with the transfer.
At the time, Aegon claimed that it acted appropriately and conducted adequate due diligence.
The provider pointed to previous determinations in which the ombudsman said that providers should be given up to three months to update their transfer processes following the publication of the Scorpion guidance.
The ombudsman did not proceed with Mr R’s complaint and found that Aegon had acted appropriately, agreeing that the provider was not required to have updated its transfer processes before the date the transfer was originally made.
However, the ombudsman reviewed the cases he previously determined on the issue and considered that “a period of approximately one month would generally be sufficient for a provider to put in place any procedures necessary as a result of the regulator’s new guidance”.
Where a provider cannot meet this timeframe, the ombudsman stated that he would expect it to consider suspending transfers until changes to its processes and member communications could be sought.
The DWP has published a consultation on the draft Occupational and Personal Pension Schemes (Disclosure of Information) (Amendment) Regulations 2022 and associated draft statutory guidance. The proposed changes set to come into effect in April 2022. The draft legislation and guidance introduce new requirements for the length and format of annual workplace pension benefit statements, which are sent to members of specific DC workplace pension schemes used for auto-enrolment.
Minister for Pensions and Financial Inclusion Guy Opperman said: “It’s clear the status quo is not working, with savers left puzzled by the complex, sprawling, jargon-filled statements commonly used by the pensions industry. Simpler statements will set a new standard for how pension companies communicate with their members.”
The consultation closes on 29 June 2021.
TPR and the FCA have launched a joint call for input, asking the pensions industry how consumers decide about their pension at key points throughout their working lives. The call for input is intended to prompt a broad discussion with the industry to explore the factors affecting how consumers save for their retirement and find ways to improve the journey from joining the workforce to retirement.
Richard Edes, Interim Director of Strategy and Risk at TPR, said: “The past decade has seen a pensions revolution with many more savers now putting something away for retirement. But decisions made by savers, some that they aren’t even aware of, can have a significant impact on the kind of retirement outcomes they can expect. That’s why we want views on how we can improve the pensions consumer journey, putting savers at the heart of all that we do and supporting them now and in the future.”
The consultation closes on 30 July 2021.
In a written statement, Luke Hall, Minister for Regional Growth and Local Government, has confirmed several key elements of changes that will be made to the Local Government Pension Scheme (LGPS) to remove age discrimination in line with the McCloud ruling. Mr Hall said: “The overarching aim is that the changes will address the findings of the courts and provide protection to all qualifying members when their benefits are drawn from the scheme.”
Mr Hall confirmed that a full Government response to the 2020 consultation on amendments to the statutory underpin will be published later this year, containing further detail on the changes announced. Mr Hall said: “It is anticipated that regulations giving effect to these changes will be made after new primary legislation in relation to public service pensions has completed its passage through Parliament and the Government's intention is that regulations will come into force on 1 April 2023.”
On 7 May 2021, the FCA launched a consultation on proposals for a new category of fund, a long-term asset fund (“LTAF”), with the aim of providing a fund structure specifically designed to accommodate relatively illiquid assets. The LTAF would be aimed at DC providers and schemes which may be interested in investing part of their assets in an LTAF. The Government announced in the 2021 budget that it is looking to encourage pension funds to direct more of their capital towards the country’s economic recovery, with the establishment of the UK’s first LTAF in 2021.
Nikhil Rathi, Chief Executive of the FCA, commented: “This new type of fund may also be more attractive to DC pension schemes that have long investment horizons and who, under current fund structures, find it difficult to invest in these types of assets. Nevertheless, it is important that the LTAF commands the confidence of target investor groups and can meet their needs. We therefore propose rules to secure an appropriate level of consumer protection and to address specific risks related to investments in illiquid assets.”
The consultation closes on 25 June 2021.
On 7 May 2021, the FCA published its Regulatory Initiatives Grid which sets out the FCA’s priorities over the next year.
Amongst other things, it confirms the FCA will continue its supervisory and enforcement work on DB-DC pension transfer advice, “aimed at redressing previous unsuitable advice”, until at least Spring 2022.
On 11 May 2021, the European Parliament’s Civil Liberties Committee (“LIBE”) announced that it had passed a resolution calling on the European Commission to amend the draft adequacy decisions for the UK to bring them in line with EU court rulings and concerns raised by the European Data Protection Board (“EDPB”).
The resolution states that if the implementing adequacy decisions are adopted without changes, national data protection authorities in the EU should suspend transfers of personal data to the UK when “indiscriminate access” to personal data is possible.
The hope is that the European Commission will finalise the adequacy decisions before the “bridging” mechanism ends (currently set to be the end of June 2021.
The ICO had recommended that organisations have alternative data transfer measures in place by the end of June 2021 in the event agreement was not reached.
The ICO has confirmed that its new data sharing code of practice was laid before Parliament on 18 May 2021 and, in the absence of any objections, will come into force after 40 sitting days.
The code aims to guide organisations through the practical steps they need to take to share data lawfully and “to give businesses and organisations the confidence to share data in a fair, safe and transparent way”.
The Pensions Regulator (TPR) and the Pension Protection Fund (PPF) have published a joint consultation document setting out proposed changes to asset class information that is collected annually from defined benefit pension schemes via the pension scheme return on Exchange.
TPR used the information to help measure investment risk, while the PPF uses it in its calculations for the PPF levy. The consultation proposes a tiered approach to the information that is requested, depending upon the size of the scheme. Larger schemes will be asked to provide more granular data.
The consultation closed on 10 June 2021.
In the Government’s ‘Review of the Default Fund Charge Cap and Standardised Costs Disclosure’ published on 13 January 2021, they set out their intention to introduce a threshold (de minimis) below which the flat fee element of the combination charge used by pension providers cannot be charged to members. The de minimis would be set at £100.
The Government is now consulting on the policy around implementing the de minimis and the Statutory Instrument required to bring about this change.
This consultation seeks views on the broader direction on the future structure of permitted charges within the charge cap. The consultation sets out the Government’s proposal to move to a single, permitted universal charging structure for use within the default fund of qualifying Defined Contribution pension schemes used for automatic enrolment.
The consultation closes on 16 July 2021.
The Financial Ombudsman Service (FOS) has published its annual complaints data for the 20/21 financial year. The figures show a 91% increase in complaints about investments and pensions compared with the previous year. The most complained-about product was Self Invested Personal Pensions, and the issue most complained-about was administration/customer service.
The Pensions Regulator (TPR) is consulting on changes to its Code of Practice 12 following the introduction, by the Pension Schemes Act 2021, of new tests in relation to its Contribution Notice (CN) power.
The legislation, passed earlier this year, amends TPR’s CN power (under section 38 of the Pensions Act 2004). It introduces two new ways in which TPR can assess the impact of an act - the employer insolvency test and the employer resources test. The new tests are in addition to the existing main purpose and material detriment tests.
As a result of the introduction of these new tests, TPR is updating its Code of Practice to explain the circumstances in which it will consider issuing a CN based on the new tests.
The proposed draft of the code can be view here.
The consultation closes on 7 July 2021.